SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    ________ 

                                   FORM 10-Q
(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934

                  For the quarterly period ended June 16, 1997

                                     OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ____________ to _______________
                              
                        Commission file number 0-19649

                       Checkers Drive-In Restaurants, Inc.
             (Exact name of Registrant as specified in its charter)

                 Delaware                                 58-1654960
       (State or other jurisdiction of                 (I.R.S. employer
       incorporation or organization)                  identification no.)

       Barnett Bank Building
       600 Cleveland Street, Eighth Floor
       Clearwater, FL                                      34615
       (Address of principal executive offices)          (Zip code)

Registrant's telephone number, including area code:  (813) 441-3500

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         The Registrant had 60,750,058  shares of Common Stock,  par value $.001
per share, outstanding as of July 15, 1997.

       This document contains 75 pages. Exhibit Index appears at page 21.



<PAGE>



                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>


PART I     FINANCIAL INFORMATION                                                 PAGE

<S>          <C>                                                                 <C>                                     
Item 1       Financial Statements (Unaudited)
                Condensed Consolidated Balance Sheets
                    June 16, 1997 and December 30, 1996..........................  3
                Condensed Consolidated Statements of Operations
                    Quarter ended June 16, 1997 and June 17, 1996
                    and Two Quarters ended June 16, 1997 and June 17, 1996.......  5
                Condensed Consolidated Statements of Cash Flows
                    Two Quarters ended June 16, 1997 and June 17, 1996...........  6
                Notes to Consolidated Financial Statements.......................  7

Item 2       Management's Discussion and Analysis of Financial Condition
              and Results of Operations.......................................... 12



PART II      OTHER INFORMATION

Item 1       Legal Proceedings................................................... 19

Item 6       Exhibits and Reports on Form 8-K.................................... 19

</TABLE>

































                                         2


<PAGE>



PART I.    FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)

                              CHECKERS DRIVE-IN RESTAURANTS, INC.
                                       AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (Dollars in thousands)
                                            ASSETS
<TABLE>     
<CAPTION>
                                                                   (Unaudited)
                                                                     June 16,      December 30,
                                                                      1997             1996
                                                                   ---------------------------------
<S>                                                                      <C>              <C>      
CURRENT ASSETS:

Cash and cash equivalents:
     Restricted                                                          $   2,566        $   1,505
     Unrestricted                                                            1,346            1,551
Accounts receivable                                                          2,299            1,544
Notes receivable                                                               353              214
Inventory                                                                    2,157            2,261
Property and equipment held for sale                                         5,316            7,608
Income taxes receivable                                                         --            3,514
Deferred loan costs                                                          1,830            2,452
Prepaid expenses and other current assets                                      803              306
                                                                   ---------------------------------

       Total current assets                                                 16,670           20,955


Property and equipment, at cost, net of accumulated depreciation
    and amortization                                                        93,804           98,188
Intangibles, net of accumulated amortization                                11,886           12,284
Deferred loan costs - less current portion                                   1,867            3,900
Deposits and other non-current assets                                          687              783
                                                                   ---------------------------------

                                                                          $124,914         $136,110
                                                                   =================================

</TABLE>


























See Notes to Condensed Consolidated Financial Statements



                                             3


<PAGE>


                                     CHECKERS DRIVE-IN RESTAURANTS, INC.
                                              AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                           (Dollars in thousands)
                                    LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                              (Unaudited)
                                                                               June 16,            December 30,
                                                                                 1997                  1996
                                                                            -----------------------------------------
<S>                                                                          <C>                 <C>       
CURRENT LIABILITIES:

Short term debt                                                              $         --        $    2,500
Current installments of long-term debt                                              8,221             9,589
Accounts payable                                                                    7,967            15,142
Accrued wages, salaries and benefits                                                2,172             2,528
Reserves for restructuring, restaurant relocations and abandoned sites              3,216             3,800
Other Accrued liabilities                                                          10,846            13,784
Deferred income                                                                       444               337
                                                                            ---------------------------------

       Total current liabilities                                                   32,866            47,680


Long-term debt, less current installments                                          30,494            39,906
Deferred franchise fee income                                                         466               466
Minority interests in joint ventures                                                1,361             1,455
Other noncurrent liabilities                                                        6,619             6,263
                                                                            ---------------------------------

       Total liabilities                                                           71,806            95,770


STOCKHOLDERS' EQUITY:

Preferred stock, $.001 par value, authorized 2,000,000 shares, issued and
    outstanding 87,719 at June 16, 1997 (none at December 30, 1996)                     0                --
Common stock, $.001 par value, authorized 100,000,000 shares, issued
    and outstanding 60,750,058 at June 16, 1997 and 51,768,480 at
    December 30, 1996                                                                  61                52
Additional paid-in capital                                                        109,748            90,339
Warrants                                                                            9,463             9,463
Retained earnings                                                                (65,764)          (59,114)
                                                                            ---------------------------------

                                                                                   53,508            40,740
Less treasury stock, at cost, 578,904 shares                                          400               400
                                                                            ---------------------------------

       Net stockholders' equity                                                    53,108            40,340
                                                                            ---------------------------------

                                                                             $    124,914      $    136,110
                                                                            =================================

</TABLE>














See Notes to Condensed Consolidated Financial Statements

                                              4


<PAGE>





                                CHECKERS DRIVE-IN RESTAURANTS, INC.
                                         AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (In thousands except per share amounts)
                                            (UNAUDITED)
<TABLE> 
<CAPTION>
                                                       Quarter Ended                  Two Quarters Ended

                                                June 16, 1997   June 17, 1996   June 16, 1997   June 17, 1996
                                                --------------------------------------------------------------
<S>                                                  <C>            <C>              <C>             <C>     
REVENUES:

Net restaurant sales                                 $ 31,753       $  36,109        $ 64,201        $ 72,318
Franchise revenues and fees                             1,714           2,009           3,325           4,108
Modular restaurant packages                               246             532             344             647
                                                --------------------------------------------------------------

Total revenues                                         33,713          38,650          67,870          77,073
                                                --------------------------------------------------------------

COSTS AND EXPENSES:

Restaurant food and paper costs                        10,404          12,281          21,509          24,663
Restaurant labor costs                                  9,792          12,751          21,130          25,202
Restaurant occupancy expense                            2,506           2,833           5,232           5,657
Restaurant depreciation and amortization                1,899           1,956           3,827           3,958
Advertising expense                                     1,596           1,245           3,240           2,107
Other restaurant operating expense                      3,186           3,418           6,432           6,238
Costs of modular restaurant package revenues              213             649             289             998
Other depreciation and amortization                       509             899           1,029           1,667
General and administrative expenses                     3,506           4,046           6,899           7,297
                                                --------------------------------------------------------------

    Total costs and expenses                           33,611          40,078          69,587          77,787
                                                --------------------------------------------------------------

    Operating (loss) income                               102         (1,428)         (1,717)           (714)
                                                --------------------------------------------------------------

OTHER INCOME (EXPENSE):

Interest income                                           102             339             181             495
Interest expense                                      (1,177)         (1,298)         (2,519)         (2,515)
Interest - loan cost amortization                       (485)            (55)         (2,655)            (90)
                                                --------------------------------------------------------------

  Loss before minority interests and income
     tax expense (benefit)                            (1,458)         (2,442)         (6,710)         (2,824)
Minority interests                                         11              40            (60)              66
                                                --------------------------------------------------------------

Loss before income tax benefit                        (1,469)         (2,482)         (6,650)         (2,890)
Income tax benefit                                         --           (934)              --         (1,089)
                                                --------------------------------------------------------------

  Net loss                                          $ (1,469)       $ (1,548)       $ (6,650)       $ (1,801)
                                                ==============================================================

Net loss per common share                             $(0.02)         $(0.03)         $(0.11)         $(0.03)
                                                ==============================================================

Weighted average number of common shares
outstanding                                            60,750          51,699          57,970          51,613
                                                ==============================================================
</TABLE>


                                                         
                                                         5

<PAGE>

                                 CHECKERS DRIVE-IN RESTAURANTS, INC.
                                          AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (Dollars in thousands)
                                             (UNAUDITED)
<TABLE>
<CAPTION>

                                                                         Two Quarters Ended

                                                                  June 16, 1997     June 17, 1996
                                                               ------------------------------------
<S>                                                                <C>               <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                           $  (6,650)        $    (1,801)
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
      Depreciation and amortization                                     4,856               5,678
      Deferred loan cost amortization                                   2,655                  90
      Provision for bad debt                                              201                 136
      (Gain) loss on sale of property & equipment                         (8)                 105
     Minority interests in (losses) earnings                             (60)                  66
Change in assets and liabilities:
     Increase in receivables                                            (995)               (312)
     Decrease in notes receivable                                          40                   7
     Decrease in inventory                                                165                 119
     Decrease in costs and earnings in excess of
        billings on uncompleted contracts                                 213                 143
     Decrease in income taxes receivable                                3,514               1,585
     Increase in prepaid expenses and other                             (530)             (1,462)
     Increase in deferred income tax assets                                --                (69)
     Decrease in deposits and other noncurrent assets                      95                  20
     (Decrease), Increase in accounts payable                         (6,991)               2,143
     Decrease in accrued liabilities                                  (3,898)             (3,358)
     Increase in deferred income                                          107                  18
                                                              -------------------------------------

       Net cash (used in) provided by operating activities            (7,286)               3,108

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                                    (756)             (1,745)
Proceeds from sale of assets                                            2,827               1,468
Increase in goodwill                                                     (70)                  --
                                                              -------------------------------------

       Net cash provided by (used in) investing activities              2,001               (277)
                                                              -------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on short term debt                                         (2,500)                  --
Principal payments on long-term debt                                 (10,776)             (3,443)
Net proceeds from private placement                                    19,450                  --
Proceeds from investment by minority interests                             --                 285
Distributions to minority interests                                      (33)               (130)
                                                              -------------------------------------

       Net cash provided by (used in) financing activities              6,141             (3,288)
                                                              -------------------------------------

       Net increase in cash                                               856               (457)
CASH AT BEGINNING OF PERIOD                                             3,056               3,364
                                                              -------------------------------------

CASH AT END OF PERIOD                                               $   3,912           $   2,907
                                                              =====================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
        Interest paid                                               $   3,003           $   2,514
                                                              =====================================
</TABLE>
                                                     6

<PAGE>
                       CHECKERS DRIVE-IN RESTAURANTS, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                   (UNAUDITED)

(a)         BASIS  OF  PRESENTATION  -  The  accompanying   unaudited  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim  financial  information and the instructions to Form 10-Q
and  Article 10 of  Regulation  S-X.  Accordingly,  they do not  include all the
information and notes required by generally accepted  accounting  principles for
complete  financial  statements.  In the opinion of management,  all adjustments
necessary  to  present  fairly  the  information  set  forth  therein  have been
included.  The operating results for the quarter and the two quarters ended June
16, 1997, are not  necessarily an indication of the results that may be expected
for the fiscal year ending December 29, 1997. Except as disclosed herein,  there
has been no material  change in the  information  disclosed  in the notes to the
consolidated  financial  statements  included in the Company's  Annual Report on
form 10-K for the year ended December 30, 1996. Therefore,  it is suggested that
the accompanying  financial statements be read in conjunction with the Company's
December 30, 1996 consolidated financial statements.  As of January 1, 1994, the
Company changed from a calendar reporting year ending on December 31st to a year
which will end on the Monday  closest to December 31. Each  quarter  consists of
three 4-week  periods with the exception of the fourth quarter which consists of
four 4-week periods.

(b)         PURPOSE  AND  ORGANIZATION  - The  principal  business  of  Checkers
Drive-In  Restaurants,  Inc. (the "Company") is the operation and franchising of
Checkers  Restaurants.  At June 16, 1997,  there were 480  Checkers  Restaurants
operating in 23 different states, the District of Columbia,  and Puerto Rico. Of
those Restaurants, 233 were Company-operated (including thirteen joint ventures)
and 247 were operated by  franchisees.  The accounts of the joint  ventures have
been  included  with  those  of the  Company  in  these  consolidated  financial
statements.  Champion  Modular  Restaurant  Company,  a division of the Company,
("Champion")  manufactures  Modular Restaurant  Packages ("MRP's") primarily for
the Company and franchisees.

            The consolidated  financial  statements also include the accounts of
all of the Company's  subsidiaries.  Intercompany balances and transactions have
been eliminated in  consolidation  and minority  interests have been established
for the outside partners' interests.

(c)         REVENUE  RECOGNITION - Franchise fees are generated from the sale of
rights  to  develop,  own and  operate  Restaurants.  Such fees are based on the
number of potential  Restaurants in a specific area which the franchisee  agrees
to develop pursuant to the terms of the franchise  agreement between the Company
and the  franchisee  and are  recognized  as  income  on a pro rata  basis  when
substantially  all of the  Company's  obligations  per location  are  satisfied,
generally at the opening of the Restaurant. Franchise fees are nonrefundable.

            The  Company  receives  royalty  fees  from  franchisees  based on a
percentage of each restaurant's  gross revenues.  Royalty fees are recognized as
earned.

            Champion recognizes revenues on the percentage-of-completion method,
measured by the percentage of costs incurred to the estimated total costs of the
contract.

(d)         CASH, AND CASH EQUIVALENTS - The Company considers all highly liquid
instruments  purchased with an original maturity of less than three months to be
cash equivalents.

(e)         RECEIVABLES  -  Receivables  consist  primarily of  franchise  fees,
royalties  and  notes due from  franchisees,  and  receivables  from the sale of
modular  restaurant  packages.  Allowances  for doubtful  receivables  were $1.8
million at June 16, 1997 and $2.2 million at December 30, 1996.

(f)         INVENTORY - Inventories  are stated at the lower of cost  (first-in,
first-out (FIFO) method) or market.

(g)         DEFERRED  LOAN COSTS - Deferred  loan costs  incurred in  connection
with the Company's  November 22, 1996 restructure of its primary credit facility
(see Note 2) are being amortized on the effective interest method.




                                        7


<PAGE>



(h)         PROPERTY AND  EQUIPMENT - Property and  equipment (P & E) are stated
at cost except for P & E that have been impaired,  for which the carrying amount
is reduced to estimated fair value.  Property and equipment under capital leases
are stated at their fair value at the inception of the lease.  Depreciation  and
amortization  are computed on  straight-line  method over the  estimated  useful
lives of the assets.

(i)         IMPAIRMENT OF LONG LIVED ASSETS - During the fourth quarter of 1995,
the Company early adopted the  Statement of Financial  Accounting  Standards No.
121,  "Accounting for the Impairment of Long-Lived  Assets and Long-Lived Assets
to be  Disposed  Of"  (SFAS  121)  which  requires  the  write-down  of  certain
intangibles and tangible property  associated with under performing sites to the
level supported by the forecasted discounted cash flow.

(j)         Goodwill  and  Non-Compete  Agreements  - Goodwill  and  non-compete
agreements are being amortized over 20 years and 3 to 7 years, respectively,  on
a straight-line basis.

(k)         INCOME  TAXES - The  Company  accounts  for income  taxes  under the
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" (SFAS 109). Under the asset or liability method of SFAS 109, deferred tax
assets  and  liabilities   are  recognized  for  the  future  tax   consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and liabilities  and their  respective tax bases.  Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered  or settled.  Under SFAS 109, the effect on deferred tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date (see Note 4).

(l)         USE OF ESTIMATES - The  preparation  of the financial  statements in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reported period. Actual results could differ from those estimates.

(m)         DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS - The balance
sheets as of June 16, 1997 and December 30, 1996, reflect the fair value amounts
which have been determined,  using available market  information and appropriate
valuation methodologies. However, considerable judgement is necessarily required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates  presented  herein are not  necessarily  indicative of the amounts
that  the  Company  could  realize  in a  current  market  exchange.  The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

            Cash  and  cash  equivalents,  receivables,  accounts  payable,  and
short-term debt - The carrying amounts of these items are a reasonable  estimate
of their fair value.

            Long-term debt - Interest rates that are currently  available to the
Company for issuance of debt with similar  terms and  remaining  maturities  are
used to estimate fair value for debt issues that are not quoted on an exchange.

(n)         EARNINGS  PER SHARE - In February  1997,  the  Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 128,
"Earnings  Per Share,"  ("SFAS 128") which is effective  for  reporting  periods
ending after December 15, 1997.  SFAS 128 replaces the  presentation  of primary
earnings  per share and fully  diluted  earnings per share  previously  found in
Accounting Principles Board Opinion No. 15, "Earnings Per Share" ("APB 15") with
basic earnings per share and diluted  earnings per share.  Due to the net losses
for each of the periods ended June 16, 1997 and June 17, 1996,  the inclusion of
options  and  warrants  would  result  in  an  antidilutive  per  share  amount.
Therefore,  for all periods  presented,  such  options and warrants are excluded
from earnings per share calculations under both APB 15 and, on a proforma basis,
SFAS 128.

(o)         RECLASSIFICATIONS - Certain amounts in the 1996 financial statements
have been reclassified to conform to the 1997 presentation.





                                        8


<PAGE>
NOTE 2      LONG-TERM DEBT

Long-term debt consists of the following:
(Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                   June 16,   December 30,
                                                                                     1997          1996
                                                                                ---------------------------
<S>                                                                              <C>           <C>       
Notes payable under Loan Agreement                                               $   26,574    $   35,818
Notes payable due at various dates, secured by buildings and equipment, with
   interest at rates primarily ranging from 9.0% to 15.83%, payable monthly           7,610         8,963
Unsecured notes payable, bearing interest at rates ranging from prime to 18%          3,381         3,481
Other                                                                                 1,150         1,233
                                                                                ---------------------------
Total long-term debt                                                                 38,715        49,495
Less current installments                                                             8,221         9,589
                                                                                ---------------------------
Long-term debt, less current installments                                        $   30,494    $   39,906
                                                                                ===========================
</TABLE>
            On July 29,  1996,  the debt  under the  Company's  prior  bank loan
agreement (the "Loan  Agreement")  and credit line ("Credit  Line") was acquired
from a bank  group by an  investor  group  led by an  affiliate  of DDJ  Capital
Management,  LLC  (collectively,  "DDJ"). The Company and DDJ began negotiations
for  restructuring  of the debt. On November 14, 1996, and prior to consummation
of a formal debt  restructuring  with DDJ, the debt under the Loan Agreement and
Credit Line was acquired from DDJ by a group of entities and  individuals,  most
of whom are engaged in the fast food  restaurant  business.  This investor group
(the "CKE Group") was led by CKE  Restaurants,  Inc., the parent of Carl Karcher
Enterprises,  Inc., Casa Bonita, Inc., and Summit Family Restaurants,  Inc. Also
participating  were  most  members  of the DDJ  Group,  as well as KCC  Delaware
Company,  a wholly-owned  subsidiary of Giant Group,  Ltd., which is a principal
shareholder of Rally's  Hamburgers,  Inc. Waivers of all defaults under the Loan
Agreement and Credit Line were granted  through  November 22, 1996, to provide a
period of time during  which the Company  and the CKE Group could  negotiate  an
agreement on debt restructuring.

            On November  22,  1996,  the  Company and the CKE Group  executed an
Amended and Restated Credit Agreement (the "Restated Credit Agreement")  thereby
completing a restructuring  of the debt under the Loan  Agreement.  The Restated
Credit  Agreement  consolidated all of the debt under the Loan Agreement and the
Credit  Line into a single  obligation.  At the time of the  restructuring,  the
outstanding  principal  balance under the Loan Agreement and the Credit Line was
$35.8 million.  Pursuant to the terms of the Restated Credit Agreement, the term
of the debt was extended by one (1) year until July 31,  1999,  and the interest
rate on the  indebtedness  was reduced to a fixed rate of 13%. In addition,  all
principal payments were deferred until May 19, 1997, and the CKE Group agreed to
eliminate  certain  financial  covenants,  to  relax  others  and  to  eliminate
approximately $6 million in restructuring fees and charges.  The Restated Credit
Agreement also provided that certain  members of the CKE Group agreed to provide
to the Company a short term revolving line of credit of up to $2.5 million, also
at a fixed interest rate of 13% (the "Secondary  Credit Line"). In consideration
for the  restructuring,  the Restated Credit  Agreement  required the Company to
issue to the CKE Group warrants to purchase an aggregate of 20 million shares of
the Companys' common stock at an exercise price of $.75 per share, which was the
approximate  market price of the common stock prior to the  announcement  of the
debt  transfer.  As of June 16,  1997,  the Company  has  reduced the  principal
balance under the Restated  Credit  Agreement by $9.2 million and has repaid the
Secondary  Credit  Line in full.  A portion of the funds  utilized to make these
principal  reduction  payments  were  obtained by the  Company  from the sale of
certain  closed  restaurant  sites to third parties.  Additionally,  the Company
utilized  $10.5  million of the proceeds  from the  February  21, 1997,  private
placement which is described later in this section for these principal reduction
payments.  Pursuant  to  the  Restated  Credit  Agreement,  the  prepayments  of
principal  made in 1996 and  early  in 1997  will  relieve  the  Company  of the
requirement to make any of the regularly  scheduled principal payments under the
Restructured  Credit  Agreement which would have otherwise  become due in fiscal
year 1997. The Amended and Restated Credit Agreement provides however,  that 50%
of any future asset sales must be utilized to prepay principal.

            The  Company  has  outstanding  promissory  notes  in the  aggregate
principal  amount  of  approximately  $4.5  million  (the  "Notes")  payable  to
Rall-Folks, Inc. ("Rall-Folks"),  Restaurant Development Group, Inc. ("RDG") and
Nashville Twin Drive-Through Partners, L.P. ("N.T.D.T."). The Company had agreed
to  acquire  the Notes  issued to  Rall-Folks  and RDG in  consideration  of the
issuance of an aggregate of approximately 2.8 million shares of Common Stock and
the Note issued to NTDT in exchange for a convertible note in the same principal
amount  and  convertible  into  approximately  927,000  shares of  Common  Stock
pursuant to purchase  agreements entered into in 1995 and subsequently  amended.
                                         9

<PAGE>
All three of the parties  received varying degrees of protection on the purchase
price of the promissory  notes.  Accordingly,  the actual number of shares to be
issued  will be  determined  by the market  price of the  Company's  stock.  The
Company was not able to consummate these  transactions as originally  scheduled.
Pusuant to the most recent  amendment,  consumation of the  Rall-Folks,  RDG and
NTDT  purchases is to occur prior to December 16,  November 25, and November 15,
1997, respectively,  subject to extension in certain cases. The Company does not
currently  have  sufficient  cash available to pay one or more of these notes if
required to do so.

NOTE 3:       PRIVATE PLACEMENT

            On February 21, 1997, the Company completed a private placement (the
"Private  Placement") of 8,771,929 shares of the Company's  common stock,  $.001
par value, and 87,719 shares of the Company's Series A preferred stock, $114 par
value (the "Preferred Stock"). CKE Restaurants,  Inc. purchased 6,162,299 of the
Company's  common stock and 61,623 of the  Preferred  Stock and other  qualified
investors,  including  other  members  of the CKE  Group of  lenders  under  the
Restated  Credit  Agreement,  also  participated in the Private  Placement.  The
Company  received  approximately  $19.5 million in net proceeds from the Private
Placement.

            The Private Placement  purchase  agreement requires that the Company
submit to its shareholders for vote at its 1997 Annual Shareholders' Meeting the
conversion  of the  Preferred  Stock into shares of the  Company's  common stock
based upon the Preferred Stock  liquidation  preference.  If the shareholders do
not vote in favor of the conversion, the Preferred Stock will remain outstanding
with the rights and  preferences  set forth in the Certificate of Designation of
Series A Preferred Stock of the Company (the  "Certificate",  a copy of which is
an  Exhibit  hereto),  including  (i)  a  dividend  preference,  (ii)  a  voting
preference,  (iii) a liquidation  preference and (iv) a redemption  requirement.
Holders of the  Preferred  Stock will have the right to receive  cash  dividends
equal to $16.53  per share per annum  payable  on a  quarterly  basis  beginning
August 19, 1997. Such dividends are cumulative and must be paid in full prior to
any dividends being declared or paid with respect to the Company's common stock.
If the Company is in default  with  respect to any  dividends  on the  Preferred
Stock,  then no cash  dividends  can be  declared  or paid with  respect  to the
Company's  common stock. If the Company fails to pay any two required  dividends
on the  Preferred  Stock,  then the  number of seats on the  Company's  Board of
Directors  will be increased by two and the holders of the Preferred  Stock will
have the right, voting as a separate class, to elect the Directors to fill those
two new seats,  which new Directors will continue in office until the holders of
the Preferred  Stock have elected  successors  or the dividend  default has been
cured.  In the event of any  liquidation,  dissolution  or  winding  up, but not
including  any  consolidation  or  merger of the  Company,  the  holders  of the
Preferred Stock will be entitled to receive a liquidation preference of $114 per
share plus any accrued but unpaid dividends (the "Liquidation  Preference").  In
the event the  stockholders do not approve the conversion of the Preferred Stock
and the Company subsequently  completes a consolidation or merger and the result
is a change in control of the Company,  then each share of the  Preferred  Stock
will  be  automatically   redeemed  for  an  amount  equal  to  the  Liquidation
Preference.  The Company is required to redeem the Preferred Stock for an amount
equal to the  Liquidation  Preference  on or before  February 12,  1999.  If the
redemption  does not occur as required,  the dividend  rate will  increase  from
$16.53  per  share to  $20.52  per  share.  Additionally,  if there are not then
Directors  serving which were elected by the holders of the Preferred Stock, the
number of  directors  constituting  the  Company's  Board of  Directors  will be
increased by two and the holders of the  Preferred  Stock voting as a class will
be entitled to elect the Directors to fill the created vacancies.

NOTE 4:     STOCK OPTION PLANS

            In  August  1991,  the  Company  adopted  a stock  option  plan  for
employees whereby  incentive stock options,  nonqualified  stock options,  stock
appreciation  rights and restrictive  shares can be granted to eligible salaried
individuals.  An  option  may vest  immediately  as of the date of grant  and no
option  will be  exercisable  after ten years  from the date of the  grant.  All
options  expire no later than 10 years from the date of grant.  The  Company has
reserved  3,500,000  shares for issuance  under the plan.  In 1994,  the Company
adopted a stock option plan for non-employee  directors,  which provides for the
automatic  grant to each  non-employee  director  upon  election to the Board of
Directors of a  non-qualified,  ten-year  option to acquire 12,000 shares of the
Company's common stock, with the subsequent  automatic grant on the first day of
each  fiscal  year  thereafter  during  the time  such  person is  serving  as a
non-employee  director  of  a  non-qualified   ten-year  option  to  acquire  an
additional 3,000 shares of common stock. The Company has reserved 200,000 shares
for issuance  under this plan.  All such options have an exercise price equal to
the closing  sale price of the common  stock on the date of grant.  One-fifth of
the  shares  of  common  stock  subject  to each  initial  option  grant  become
exercisable on a cumulative basis on each of the first five anniversaries of the

                               10

<PAGE>
grant of such option.  One-third  of the shares of common stock  subject to each
subsequent option grant become  exercisable on a cumulative basis on each of the
first three  anniversaries  of the date of the grant of such  option.  The plans
provide that shares  granted come from the Company's  authorized but unissued or
reacquired  common  stock.  The price of the options  granted  pursuant to these
plans will not be less than 100 percent of the fair  market  value of the shares
on the date of the grant.  In August 1994,  employees  granted  $11.50,  $11.63,
$12.33 and $19.00  options were given the  opportunity  to forfeit those options
and be  granted  an option  to  purchase  a share at $5.13 for every two  option
shares  retired.  As a result of this offer,  options  for  662,228  shares were
forfeited in return for options for 331,114 shares at $5.13 per share.

            In February 1996,  employees  (excluding executive officers) granted
options in 1993 and 1994 with  exercise  prices in excess of $2.75 were  offered
the opportunity to exchange for a new option grant for a lesser number of shares
at an exercise price of $1.95,  which  represented a 25% premium over the market
price of the Company's common stock on the date the plan was approved.  Existing
options  with an  exercise  price in  excess  of $11.49  could be  cancelled  in
exchange for new options on a four to one basis.  Options with an exercise price
between  $11.49 and $2.75 could be  cancelled  in exchange  for new options on a
three for one basis.  The offer to  employees  expired  April 30, 1996 and, as a
result of this offer,  options for 49,028  shares were  forfeited  in return for
options for 15,877 shares at the $1.95 exercise price.

            During the quarter ended March 24, 1997, the Company granted 285,000
options  pursuant to the terms of the 1991 Employee Stock Option Plan referenced
above and the Company  granted  options to purchase a total of 500,000 shares of
its  common  stock  as  part of  compensation  packages  for  two new  executive
officers,  which  options  were not  granted  pursuant  to the terms of the 1991
Employee  Stock Option  Plan.  During the quarter  ended June 16,  1997,  12,000
options  were  granted  pursuant to the terms of the 1994 Stock  Option Plan for
Non-Employee Directors referenced above.

            The Company has adopted the disclosure-only  provisions of Statement
of  Financial   Accounting  Standards  No.  123,  "Accounting  for  Stock  Based
Compensation."  Accordingly,  no  compensation  cost has been recognized for the
stock option plans.  Had  compensation  cost for the Company's stock option plan
for  employees  been  determined  based on the fair  value at the grant date for
awards in fiscal 1996 and each of the first two quarters of 1997 consistent with
the  provisions  of SFAS No. 123,  the  Company's  net earnings and earnings per
share  would have been  reduced by  approximately  $1.4  million,  $680,000  and
$43,000 respectively,  on a pro forma basis. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes  option-pricing  model
with the following weighted-average  assumptions used for grants in 1996 and the
first two quarters of fiscal 1997, respectively:  dividend yield of zero percent
for both periods;  expected volatility of 64 and 81 percent,  risk-free interest
rates  of  6.5  and  6.0  percent,  and  expected  lives  of  3.5  and 2  years,
respectively. The compensation cost disclosed above may not be representative of
the effects on reported income in future quarters, for example,  because options
vest over several years and additional awards are made each year.

NOTE 5:     INCOME TAXES

            The Company recorded income tax benefits of $558,000 for the quarter
ended June 16, 1997 and $934,000 for the quarter  ended June 17, 1996,  or 38.0%
of the losses  before  income  taxes.  The  Company  then  recorded a  valuation
allowance of $558,000  against  deferred  income tax assets as of June 16, 1997.
The Company's total  valuation  allowances of $29.3 million as of June 16, 1997,
is maintained on deferred tax assets which the Company has not  determined to be
more likely  than not  realizable  at this time.  Subject to a review of the tax
assets, these valuation allowances will be reversed during periods in the future
in which the Company records pre-tax income,  in amounts necessary to offset any
then recorded income tax expenses attributable to such future periods.

NOTE 6:     MERGER

            On March 25,  1997,  the  Company  agreed in  principle  to a merger
transaction  pursuant to which Rally's Hamburgers,  Inc., a Delaware corporation
("Rally's"),  was to become a  wholly-owned  subsidiary  of Checkers.  Under the
terms of the letter of intent  executed by Checkers and  Rally's,  each share of
Rally's  common stock would be converted  into three shares of Checkers'  Common
Stock  upon  consummation  of  the  merger.   The  transaction  was  subject  to
negotiation  of  definitive  agreements,  receipt of  fairness  opinions by each
party,  receipt of stockholder and other required  approvals and other customary
conditions and the ability to use the pooling of interests  method of accounting
for the merger.  On June 16, 1997,  the Company  announced  the  termination  of
merger  negotiations  due to the  inability  to obtain prior  approval  from the
Securities  and Exchange  Commission for favorable  accounting  treatment of the
proposed merger. Certain legal, accounting and other expenses totalling $350,000
associated  with  the  proposed   transaction   were  included  in  general  and
administrative expenses for the quarter ended June 16, 1997.
                                       11

<PAGE>

ITEM  2.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL  CONDITION AND
            RESULTS OF OPERATIONS

INTRODUCTION

            The Company  commenced  operations on August 1, 1987, to operate and
franchise  Checkers  double  drive-thru  Restaurants.  As of June 16, 1997,  the
Company had an ownership  interest in 233  Company-operated  Restaurants  and an
additional 247 Restaurants were operated by franchisees. The Company's ownership
interest in the  Company-operated  Restaurants  is in one of two forms:  (i) the
Company owns 100% of the  Restaurant  (as of June 16, 1997,  there were 219 such
Restaurants)  and (ii)  the  Company  owns a  10.55%  to  65.83%  interest  in a
partnership which owns the Restaurant (a "Joint Venture Restaurant") (as of June
16, 1997, there were 14 such Joint Venture Restaurants).

            The  Company  has begun to see the  positive  effects of  aggressive
programs  implemented  at the  beginning  of fiscal  1997 that are  designed  to
improve food, paper and labor costs. These costs totalled 69.2% and 63.6% of net
restaurant revenues in the first and second quarters of 1997, compared to 65.6%,
69.3%, 73.3% and 75.9% of net restaurant  revenues in the first,  second,  third
and fourth  quarters of fiscal 1996.  These  improvements in costs were achieved
despite  an 11.5%  decrease  in Company  owned  same  store  sales in the second
quarter of 1997 as  compared to the second  quarter of the prior year.  Although
the Company's  operating margins for the first half of 1997 were better than the
annualized  margins  for fiscal year 1996,  the  Company  intends to continue to
implement programs to further improve those margins.

            In February  1997,  the Company  completed a private  placement (the
"Private  Placement") of 8,771,929 shares of the Company's  common stock,  $.001
par value, and 87,719 shares of the Company's  Series A preferred  stock,  $.001
par value (the "Preferred Stock"). CKE Restaurants,  Inc. purchased 6,162,299 of
the Company's common stock and 61,623 of the Preferred Stock and other qualified
investors,  including  other  members  of the CKE  Group of  lenders  under  the
Restated  Credit  Agreement,  also  participated in the Private  Placement.  The
Company  received  approximately  $19.5 million in net proceeds from the Private
Placement.  The  Company  used $8 million of the Private  Placement  proceeds to
reduce the  principal  balance due under the  Restated  Credit  Agreement;  $2.5
million was  utilized  to repay the  Secondary  Credit  Line;  $2.3  million was
utilized to pay outstanding balances to various key food and paper distributors;
and the remaining amount was used primarily to pay down outstanding balances due
certain  other  vendors.  The  reduction of the debt under the  Restated  Credit
Agreement and the Secondary Credit Line, both of which carry a 13% interest rate
will reduce the Company's interest expense by more than $1.3 million annually.

            In the second  quarter of fiscal 1997,  the Company,  along with its
franchisees,  experienced  a net  increase of three (3)  operating  Restaurants,
compared  to a net  increase  of six (6)  operating  Restaurants  in the  second
quarter  of  fiscal  1996.  Based on  information  obtained  from the  Company's
franchisees,  in 1997, the franchise  community expects to open approximately 30
new units. The Company does not currently expect significant  further Restaurant
closures,  choosing  instead  to  focus on  improving  Restaurant  margins.  The
Company's franchisees as a whole continue to experience higher average per store
sales than Company Restaurants.

            This  Quarterly   Report  on  Form  10-Q  contains  forward  looking
statements,  which are subject to known and  unknown  risks,  uncertainties  and
other factors which may cause the actual results,  performance,  or achievements
of the Company to be materially  different from any future results,  performance
or achievements  expressed or implied by such forward-looking  statements.  Such
factors  include,  among others,  the following:  general  economic and business
conditions; the impact of competitive products and pricing; success of operating
initiatives;    advertising   and   promotional   effort;   adverse   publicity;
availability,  changes in business  strategy or  development  plans;  quality of
management;  availability,  terms and  deployment  of  capital;  the  results of
financing efforts;  food, labor, and employee benefit costs;  changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules;  and risks that any sales growth resulting from the Company's current
and future  remodeling of restaurants  and other operating  strategies  could be
sustained.








                                       12


<PAGE>

Results of Operations

            The following table sets forth the percentage  relationship to total
revenues of the listed items included in the Company's  Consolidated  Statements
of Operations.  Certain items are shown as a percentage of Restaurant  sales and
Modular Restaurant  Package revenue.  The table also sets forth certain selected
restaurant operating data.

<TABLE>
<CAPTION>
                                                             Quarter Ended                 Two Quarters Ended
                                                               (Unaudited)                     (Unaudited) 
                                                       --------------------------------------------------------------
-
                                                          June 16,      June 17,        June 16,        June 17,
                                                              1997          1996            1997            1996
                                                       -----------------------------------------------------------
<S>                                                          <C>           <C>             <C>             <C>  
Revenues:
    Net restaurant sales                                     94.2%         93.4%           94.6%           93.8%
    Franchise revenues and fees                               5.1%          5.2%            4.9%            5.4%
    Modular restaurant packages                               0.7%          1.4%            0.5%            0.8%
                                                       -----------------------------------------------------------

          Total revenue                                       100%          100%            100%            100%

Costs and Expenses:
    Restaurant food and paper costs (1)                      32.8%         34.0%           33.5%           34.1%
    Restaurant labor costs (1)                               30.8%         35.3%           32.9%           34.8%
    Restaurant occupancy expense (1)                          7.9%          7.8%            8.1%            7.8%
    Restaurant depreciation and amortization (1)              6.0%          5.4%            6.0%            5.5%
    Advertising expense (1)                                   5.0%          3.4%            5.0%            2.9%
    Other restaurant operating expense (1)                   10.0%          9.5%           10.0%            8.6%
    Costs of modular restaurant package revenues(2)          86.5%        122.0%           84.0%          154.4%
    Other depreciation and amortization                       1.5%          2.3%            1.5%            2.2%
    Selling, general and administrative expense              10.4%         10.5%           10.2%            9.5%
                                                       -----------------------------------------------------------
           Operating (loss) income                            0.3%        (3.7%)          (2.5%)          (0.9%)
                                                       -----------------------------------------------------------
Other income (expense):
    Interest income                                           0.3%          0.9%            0.3%            0.6%
    Interest expense                                        (3.5%)        (3.4%)          (3.7%)          (3.3%)
    Interest - loan cost amortization                       (1.4%)        (0.1%)          (3.9%)          (0.1%)
    Minority interests                                        0.0%          0.1%          (0.1%)            0.1%
                                                       -----------------------------------------------------------
       Loss before income tax benefit                       (4.4%)        (6.4%)          (9.8%)          (3.7%)
    Income tax expense (benefit)                              0.0%        (2.4%)            0.0%          (1.4%)
                                                       -----------------------------------------------------------
       Net loss                                             (4.4%)        (4.0%)          (9.8%)          (2.3%)
                                                       ===========================================================
Operating data:
    System-wide restaurant sales (in 000's):
       Company-operated                                  $  31,753     $  36,109       $  64,201       $  72,318
       Franchised                                           41,255        47,182          81,259          89,297
                                                       -----------------------------------------------------------
             Total                                       $  73,008     $  83,291        $145,460      $  161,615
                                                       ===========================================================
                                                       

                                                                                            1997            1996
                                                                                  --------------------------------
Average annual net sales per restaurant open for a full year (in 000's) (3):
    Company-operated                                                                        $619            $620
    Franchised                                                                              $762            $769
    System-wide                                                                             $690            $719
                                                                                  --------------------------------
Number of Restaurants (4)
    Company-operated                                                                         233             243
    Franchised                                                                               247             264
                                                                                  --------------------------------
         Total                                                                               480             507
                                                                                  ================================

(1)    As a percent of net restaurant sales.
(2)    As a percent of Modular restaurant package revenues.
(3)    Includes sales of Restaurants open for entire trailing 13 period year including stores expected to be closed
       in the following year.
(4)    Number of Restaurants open at end of period.
</TABLE>

                                                     13

<PAGE>

COMPARISON OF HISTORICAL RESULTS - QUARTER ENDED JUNE 16, 1997 AND QUARTER ENDED
JUNE 17, 1996

            REVENUES.  Total revenues  decreased  12.8% to $33.7 million for the
quarter  ended June 16, 1997,  compared to $38.7  million for the quarter  ended
June 17, 1996.  Company-operated  net restaurant  sales decreased 12.1% to $31.8
million for the quarter ended June 16, 1997,  from $36.1 million for the quarter
ended  June  17,  1996.  Net  restaurant  sales  for  comparable   Company-owned
Restaurants for the quarter ended June 16, 1997, decreased 11.5% compared to the
quarter  ended June 17, 1996.  Comparable  Company-owned  Restaurants  are those
continuously  open  during  both  reporting  periods.  These  decreases  in  net
restaurant sales and comparable net restaurant sales are primarily  attributable
to a highly  competitive  environment  during the second quarter of 1997 and the
Company's 1997 focus on cutting costs and developing a new advertising  campaign
for the remainder of 1997.

            Franchise  revenues and fees decreased 14.7% to $1.7 million for the
quarter  ended June 16, 1997,  from $2.0 million for the quarter  ended June 17,
1996.  This was a result of a net reduction of 17 franchised  restaurants  since
June 17, 1996, and opening fewer franchised Restaurants during the quarter ended
June 16,  1997,  than in the second  quarter  of 1996.  The  Company  recognizes
franchise  fees as revenues  when the Company has  substantially  completed  its
obligations  under  the  franchise  agreement,  usually  at the  opening  of the
franchised Restaurant.

            Modular  restaurant package revenues decreased 53.7% to $246,000 for
the quarter  ended June 16, 1997,  from  $532,000 for the quarter ended June 17,
1996.  Modular  restaurant  package revenues are recognized on the percentage of
completion  method during the  construction  process;  therefore,  a substantial
portion of the modular  restaurant  package  revenues  and costs are  recognized
prior  to the  opening  of a  Restaurant  or  shipment  to a  convenience  store
operator.

            COSTS AND EXPENSES.  Restaurant  food and paper costs totalled $10.4
million or 32.8% of net  Restaurant  sales for the quarter  ended June 16, 1997,
compared to $12.3 million or 34.0% of net restaurant sales for the quarter ended
June 17, 1996. The actual  decrease in food and paper costs was due primarily to
the  decrease in net  restaurant  sales  while the  decrease in these costs as a
percentage  of  net  restaurant  sales  was  due  to  new  purchasing  contracts
negotiated in the first quarter of 1997.

            Restaurant  labor  costs,  which  includes   restaurant   employees'
salaries,  wages,  benefits and related taxes, totalled $9.8 million or 30.8% of
net  restaurant  sales for the quarter  ended June 16,  1997,  compared to $12.8
million or 35.3% of net  restaurant  sales for the quarter  ended June 17, 1996.
The decrease in restaurant  labor costs as a percentage of net restaurant  sales
was due primarily to new labor  utilization  programs  implemented  in the first
quarter of 1997,  partially  offset by the increase in the federal  minimum wage
rate.

            Restaurant  occupancy expense,  which includes rent, property taxes,
licenses and insurance,  totalled $2.5 million or 7.9% of net  restaurant  sales
for the quarter  ended June 16,  1997,  compared to $2.8  million or 7.8% of net
restaurant  sales  for the  quarter  ended  June  17,  1996.  This  increase  in
restaurant  occupancy  costs as a  percentage  of net  restaurant  sales was due
primarily to the decline in average net  restaurant  sales relative to the fixed
and  semi-variable  nature of these expenses and the acquisition of interests in
12 Restaurants in the high cost Chicago market in the third quarter of 1996.

            Restaurant  depreciation  and  amortization  decreased  2.9% to $1.9
million for the quarter  ended June 16, 1997,  from $2.0 million for the quarter
ended June 17, 1996, due primarily to fourth quarter 1996 impairments  under the
Statement of  Financial  Accounting  Standards  No. 121 and a net decrease of 10
Company-operated  restaurants from June 17, 1996, to June 16, 1997.  However, as
percentage of net restaurant  sales,  these  expenses  increased to 6.0% for the
quarter  ended  June 16,  1997 from 5.4% for the  quarter  ended  June 17,  1997
because of the greater relative decline in sales.

            Advertising  expense  increased  to  $1.6  million  or  5.0%  of net
restaurant  sales for the quarter ended June 16, 1997, from $1.2 million or 3.4%
of net  restaurant  sales for the quarter  ended June 17, 1996.  The increase in
this expense was due to decreased  utilization of coupons in lieu of advertising
dollars  in 1997  and the  second  quarter  1996  capitalization  of  television
production costs that were expensed later in 1996.

            Other  restaurant  expenses  includes  all  other  Restaurant  level
operating expenses other than food and paper costs, labor and benefits, rent and
other  occupancy  costs which include  utilities,  maintenance  and other costs.
These expenses  totalled $3.2 million or 10.0% of net  restaurant  sales for the
quarter ended June 16, 1997,  compared to $3.4 million or 9.5% of net restaurant
sales for the quarter  ended June 17, 1996.  The  increase in the quarter  ended
June 16, 1997, as a percentage of net restaurant sales was primarily  related to
the  decline in average  net  restaurant  sales  relative to the fixed and semi-
variable nature of these expenses.













                                       14

<PAGE>

            Costs of modular  restaurant  package revenues  totalled $213,000 or
86.5% of modular  restaurant  package  revenues  for the quarter  ended June 16,
1997, compared to $649,000 or 122.0% of such revenues for the quarter ended June
17, 1996. The decrease in these  expenses as a percentage of modular  restaurant
package  revenues was  attributable  to the  elimination of various excess fixed
costs in the first quarter of 1997.

            General and  administrative  expenses  were $3.5 million or 10.4% of
total revenues, for the quarter ended June 16, 1997, compared to $4.0 million or
10.5% of total revenues for the quarter ended June 17, 1996. The actual decrease
in normal recurring general and  administrative  expenses of $890,000 was mostly
attributable to a reduction in corporate  staffing early in 1997. This reduction
was  partially  offset by $350,000 of costs  incurred as a result of  terminated
merger  negotiations  with  Rally's  Hamburgers,  Inc.,  resulting in a reported
decrease of $540,000.

            INTEREST EXPENSE. Interest expense decreased to $1.2 million or 3.5%
of total revenues for the quarter ended June 16, 1997, from $1.3 million or 3.4%
of total revenues for the quarter ended June 17, 1996.  This decrease was due to
a reduction  in the  weighted  average  balance of debt  outstanding  during the
respective  periods,  partially offset by an increase in the Company's effective
interest rates since the second quarter of 1996.

            INCOME TAX  BENEFIT.  Due to the loss for the  quarter,  the Company
recorded an income tax  benefit of  $558,000 or 38.0% of the loss before  income
taxes which was completely  offset by a deferred income tax valuation  allowance
of $558,000 for the quarter  ended June 16,  1997,  as compared to an income tax
benefit of  $934,000 or 38.0% of earnings  before  income  taxes for the quarter
ended June 17, 1996.  The effective  tax rates differ from the expected  federal
tax rate of 35.0% due to state income taxes and job tax credits.

            NET LOSS.  The net loss for the quarter was $1.5 million or $.02 per
share.  This net loss was impacted by the expensing of $485,000 in deferred loan
costs and  $350,000 in  terminated  merger  costs in the quarter  ended June 16,
1997. Net loss before tax, deferred loan cost amortization and terminated merger
costs was $634,000 or $.01 per share for the quarter  ended June 16,  1997,  and
$1.5  million  or $.03 per share for the  quarter  ended  June 17,  1996,  which
resulted primarily from an increase in the average restaurant margins, decreases
in general and administrative expenses and interest expense, partially offset by
a decrease in royalties and franchise fees.

COMPARISON  OF  HISTORICAL  RESULTS - TWO  QUARTERS  ENDED JUNE 16, 1997 AND TWO
QUARTERS ENDED JUNE 17, 1996

            REVENUES.  Total revenues  decreased  11.9% to $67.9 million for the
two quarters ended June 16, 1997, compared to $77.1 million for the two quarters
ended June 17, 1996.  Company-operated  net restaurant  sales decreased 11.2% to
$64.2 million for the two quarters  ended June 16, 1997,  from $72.3 million for
the two  quarters  ended June 17,  1996.  Net  restaurant  sales for  comparable
Company-owned  Restaurants  for the two quarters ended June 16, 1997,  decreased
10.1%  compared to the quarters  ended June 17, 1996.  Comparable  Company-owned
Restaurants are those  continuously  open during both reporting  periods.  These
decreases  in net  restaurant  sales and  comparable  net  restaurant  sales are
primarily attributable to a highly competitive  environment during the first two
quarters of 1997 and the Company's  1997 focus on cutting costs and developing a
new advertising campaign for the remainder of 1997.

            Franchise  revenues and fees decreased 19.1% to $3.3 million for the
two quarters  ended June 16, 1997,  from $4.1 million for the two quarters ended
June 17, 1996. This was a result of a net reduction of 17 franchised restaurants
since June 17, 1996,  and opening fewer  franchised  Restaurants  during the two
quarters  ended  June 16,  1997,  than in the first two  quarters  of 1996.  The
Company recognizes franchise fees as revenues when the Company has substantially
completed its obligations under the franchise agreement,  usually at the opening
of the franchised Restaurant.

            Modular  restaurant package revenues decreased 46.9% to $344,000 for
the two quarters  ended June 16, 1997,  from $647,000 for the two quarters ended
June 17,  1996.  Modular  restaurant  package  revenues  are  recognized  on the
percentage of completion method during the construction  process;  therefore,  a
substantial  portion of the modular  restaurant  package  revenues and costs are
recognized  prior to the opening of a  Restaurant  or shipment to a  convenience
store operator.

            COSTS AND EXPENSES.  Restaurant  food and paper costs totalled $21.5
million or 33.5% of net  Restaurant  sales for the two  quarters  ended June 16,
1997,  compared to $24.7  million or 34.1% of net  restaurant  sales for the two
quarters  ended June 17, 1996.  The actual  decrease in food and paper costs was
due  primarily  to the  decrease in net  restaurant  sales while the decrease in
these costs as a percentage of net  restaurant  sales was due to new  purchasing
contracts negotiated in the first two quarters of 1997.

            Restaurant  labor  costs,  which  includes   restaurant   employees'
salaries,  wages, benefits and related taxes, totalled $21.1 million or 32.9% of
net restaurant sales for the two quarters ended June 16, 1997, compared to $25.2











                                         15


<PAGE>


million or 34.8% of net  restaurant  sales for the two  quarters  ended June 17,
1996.  The decrease in restaurant  labor costs as a percentage of net restaurant
sales was due primarily to new labor  utilization  programs  implemented  in the
first quarter of 1997,  partially  offset by the increase in the federal minimum
wage rate.

            Restaurant  occupancy expense,  which includes rent, property taxes,
licenses and insurance,  totalled $5.2 million or 8.1% of net  restaurant  sales
for the two quarters  ended June 16,  1997,  compared to $5.7 million or 7.8% of
net restaurant  sales for the two quarters ended June 17, 1996. This increase in
restaurant  occupancy  costs as a  percentage  of net  restaurant  sales was due
primarily to the decline in average net  restaurant  sales relative to the fixed
and  semi-variable  nature of these expenses and the acquisition of interests in
12 Restaurants in the high cost Chicago market in the third quarter of 1996.

            Restaurant  depreciation  and  amortization  decreased  3.3% to $3.8
million for the two quarters ended June 16, 1997,  from $4.0 million for the two
quarters ended June 17, 1996,  due primarily to fourth quarter 1996  impairments
under the Statement of Financial Accounting Standards No. 121 and a net decrease
of 10  Company-operated  restaurants  from  June 17,  1996,  to June  16,  1997.
However, as percentage of net restaurant sales, these expenses increased to 6.0%
for the quarter  ended June 16,  1997 from 5.5% for the  quarter  ended June 17,
1997 because of the greater relative decline in sales.

            Advertising  expense  increased  to  $3.2  million  or  5.0%  of net
restaurant  sales for the two quarters ended June 16, 1997, from $2.1 million or
2.9% of net  restaurant  sales for the two  quarters  ended June 17,  1996.  The
increase in this expense was due to decreased  utilization of coupons in lieu of
advertising dollars in 1997 and the first and second quarter 1996 capitalization
of television production costs that were expensed later in 1996.

            Other  restaurant  expenses  includes  all  other  Restaurant  level
operating expenses other than food and paper costs, labor and benefits, rent and
other  occupancy  costs which include  utilities,  maintenance  and other costs.
These expenses  totalled $6.4 million or 10.0% of net  restaurant  sales for the
two  quarters  ended  June 16,  1997,  compared  to $6.2  million or 8.6% of net
restaurant  sales for the quarters  ended June 17, 1996. The increase in the two
quarters  ended June 16,  1997,  as a  percentage  of net  restaurant  sales was
primarily related to the decline in average net restaurant sales relative to the
fixed and  semi-variable  nature of these  expenses.  The increase in the actual
expense  by 3.1% was due to  certain  one-time  credits  recorded  in the  first
quarter of 1996.

            Costs of modular  restaurant  package revenues  totalled $289,000 or
84.0% of modular restaurant package revenues for the two quarters ended June 16,
1997, compared to $998,000 or 154.4% of such revenues for the two quarters ended
June 17,  1996.  The  decrease  in these  expenses  as a  percentage  of modular
restaurant  package  revenues was  attributable  to the  elimination  of various
excess fixed costs in the first quarter of 1997.

            General and  administrative  expenses  were $6.9 million or 10.2% of
total  revenues,  for the two  quarters  ended June 16,  1997,  compared to $7.3
million or 9.5% of total  revenues for the two quarters ended June 17, 1996. The
actual  decrease  in normal  recurring  general and  administrative  expenses of
$747,000 was mostly  attributable to a reduction in corporate  staffing early in
1997.  This  reduction was partially  offset by $350,000 of costs  incurred as a
result  of  terminated  merger  negotiations  with  Rally's  Hamburgers,   Inc.,
resulting in a reported decrease of $397,000.

            INTEREST EXPENSE. Interest expense was $2.5 million or 3.7% of total
revenues for the two quarters  ended June 16, 1997,  and $2.5 million or 3.3% of
total revenues for the two quarters ended June 17, 1996.  This  consistency  was
due to a reduction in the weighted  average balance of debt  outstanding  during
the  respective  periods,  offset  by an  increase  in the  Company's  effective
interest rates since the second quarter of 1996.

            INCOME  TAX  BENEFIT.  Due to the  loss  for the two  quarters,  the
Company  recorded  an income tax  benefit  of $2.5  million or 38.0% of the loss
before  income  taxes  which was  completely  offset by a  deferred  income  tax
valuation allowance of $2.5 million for the two quarters ended June 16, 1997, as
compared  to an income tax benefit of $1.1  million or 38.0% of earnings  before
income taxes for the two quarters  ended June 17, 1996.  The effective tax rates
differ from the expected federal tax rate of 35.0% due to state income taxes and
job tax credits.

            NET LOSS. The net loss for the two quarters was $6.7 million or $.11
per share.  This net loss was  significantly  impacted by the  expensing of $2.7
million in deferred  loan costs and $350,000 in  terminated  merger costs in the
two  quarters  ended June 16,  1997.  Net loss  before tax,  deferred  loan cost
amortization and terminated  merger costs was $3.6 million or $.06 per share for
the two quarters ended June 16, 1997, and $1.5 million or $.03 per share for the
two  quarters  ended  June 17,  1996.  This  increased  net  loss was  primarily
attributable to lower levels of net restaurant sales and a decrease in royalties
and franchise fees, partially offset by an increase in average net margins and a
decline in general and administrative expenses.







                                         16


<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

            On July 29,  1996,  the debt  under the  Company's  prior  bank loan
agreement (the "Loan  Agreement")  and credit line ("Credit  Line") was acquired
from a Bank  Group by an  investor  group  led by an  affiliate  of DDJ  Capital
Management, LLC (collectively,  "DDJ"). On November 14, 1996, the debt under the
Loan  Agreement and Credit Line was acquired from DDJ by a group of entities and
individuals, most of whom are engaged in the fast food restaurant business. This
investor group (the "CKE Group") was led by CKE Restaurants, Inc., the parent of
Carl  Karcher   Enterprises,   Inc.,  Casa  Bonita,   Inc.,  and  Summit  Family
Restaurants, Inc. Also participating were most members of the DDJ Group, as well
as KCC Delaware Company,  a wholly-owned  subsidiary of GIANT GROUP, LTD., which
is a controlling shareholder of Rally's Hamburgers, Inc.

            On November  22,  1996,  the  Company and the CKE Group  executed an
Amended and Restated Credit Agreement (the "Restated Credit Agreement")  thereby
completing a restructuring  of the debt under the Loan  Agreement.  The Restated
Credit  Agreement  consolidated all of the debt under the Loan Agreement and the
Credit  Line into a single  obligation.  At the time of the  restructuring,  the
outstanding  principal  balance under the Loan Agreement and the Credit Line was
$35.8 million.  Pursuant to the terms of the Restated Credit Agreement, the term
of the debt was extended by one (1) year until July 31,  1999,  and the interest
rate on the  indebtedness  was reduced to a fixed rate of 13%. In addition,  all
principal payments were deferred until May 19, 1997, and the CKE Group agreed to
eliminate  certain  financial  covenants,  to  relax  others  and  to  eliminate
approximately $6 million in restructuring fees and charges.  The Restated Credit
Agreement also provided that certain  members of the CKE Group agreed to provide
to the Company a short term revolving line of credit of up to $2.5 million, also
at a fixed interest rate of 13% (the "Secondary  Credit Line"). In consideration
for the  restructuring,  the Restated Credit  Agreement  required the Company to
issue to the members of the CKE Group  warrants to purchase an  aggregate  of 20
million  shares of the Companys'  common stock at an exercise  price of $.75 per
share,  which was the approximate  market price of the common stock prior to the
announcement of the debt transfer.  As of June 16, 1997, the Company has reduced
the principal  balance under the Restated  Credit  Agreement by $9.2 million and
has repaid the Secondary Credit Line in full. A portion of the funds utilized to
make these  principal  reduction  payments were obtained by the Company from the
sale of certain  closed  restaurant  sites to third parties.  Additionally,  the
Company  utilized  $10.5  million of the  proceeds  from the  February 21, 1997,
private  placement  which is described  later in this  section.  Pursuant to the
Restated Credit  Agreement,  the prepayments of principal made in 1996 and early
in 1997 will relieve the Company of the requirement to make any of the regularly
scheduled principal payments under the Restructured Credit Agreement which would
have otherwise  become due in fiscal year 1997. The Amended and Restated  Credit
Agreement provides however,  that 50% of any future asset sales must be utilized
to prepay principal.

            The  Company  has  outstanding  promissory  notes  in the  aggregate
principal  amount  of  approximately  $4.5  million  (the  "Notes")  payable  to
Rall-Folks, Inc. ("Rall-Folks"),  Restaurant Development Group, Inc. ("RDG") and
Nashville Twin Drive-Through Partners, L.P. ("N.T.D.T."). The Company had agreed
to  acquire  the Notes  issued to  Rall-Folks  and RDG in  consideration  of the
issuance of an aggregate of approximately 2.8 million shares of Common Stock and
the Note issued to NTDT in exchange for a convertible note in the same principal
amount  and  convertible  into  approximately  927,000  shares of  Common  Stock
pursuant to purchase  agreements entered into in 1995 and subsequently  amended.
All three of the parties  received varying degrees of protection on the purchase
price of the promissory  notes.  Accordingly,  the actual number of shares to be
issued  will be  determined  by the market  price of the  Company's  stock.  The
Company was not able to consummate these  transactions as originally  scheduled.
Pusuant to the most recent  amendment,  consumation of the  Rall-Folks,  RDG and
NTDT  purchases is to occur prior to December 16,  November 25, and November 15,
1997, respectively,  subject to extension in certain cases. The Company does not
currently  have  sufficient  cash available to pay one or more of these notes if
required to do so.

            On February 21, 1997, the Company completed a private placement (the
"Private  Placement") of 8,771,929 shares of the Company's  common stock,  $.001
par value, and 87,719 shares of the Company's  Series A preferred  stock,  $.001
par value (the "Preferred Stock"). CKE Restaurants,  Inc. purchased 6,162,299 of
the Company's common stock and 61,623 of the Preferred Stock and other qualified
investors,  including  other  members  of the CKE  Group of  lenders  under  the
Restated  Credit  Agreement,  also  participated in the Private  Placement.  The
Company  received  approximately  $19.5 million in net proceeds from the Private
Placement.  The  Company  used $8 million of the Private  Placement  proceeds to
reduce the  principal  balance due under the  Restated  Credit  Agreement;  $2.5
million was  utilized  to repay the  Secondary  Credit  Line;  $2.3  million was
utilized to pay outstanding balances to various key food and paper distributors;
and the remaining amount was used primarily to pay down outstanding balances due
certain  other  vendors.  The  reduction of the debt under the  Restated  Credit
Agreement and the Secondary Credit Line, both of which carry a 13% interest rate
will reduce the Company's interest expense by more than $1.3 million annually.












                                       17


<PAGE>

            The Private Placement  purchase  agreement requires that the Company
submit to its shareholders for vote at its 1997 Annual Shareholders' Meeting the
conversion  of the  Preferred  Stock into shares of the  Company's  common stock
based upon the Preferred Stock  liquidation  preference.  If the shareholders do
not vote in favor of the conversion, the Preferred Stock will remain outstanding
with the rights and  preferences  set forth in the Certificate of Designation of
Series A Preferred Stock of the Company (the  "Certificate",  a copy of which is
an  Exhibit  hereto),  including  (i)  a  dividend  preference,  (ii)  a  voting
preference,  (iii) a liquidation  preference and (iv) a redemption  requirement.
Holders of the  Preferred  Stock will have the right to receive  cash  dividends
equal to $16.53  per share per annum  payable  on a  quarterly  basis  beginning
August 19, 1997. Such dividends are cumulative and must be paid in full prior to
any dividends being declared or paid with respect to the Company's common stock.
If the Company is in default  with  respect to any  dividends  on the  Preferred
Stock,  then no cash  dividends  can be  declared  or paid with  respect  to the
Company's  common stock. If the Company fails to pay any two required  dividends
on the  Preferred  Stock,  then the  number of seats on the  Company's  Board of
Directors  will be increased by two and the holders of the Preferred  Stock will
have the right, voting as a separate class, to elect the Directors to fill those
two new seats,  which new Directors will continue in office until the holders of
the Preferred  Stock have elected  successors  or the dividend  default has been
cured.  In the event of any  liquidation,  dissolution  or  winding  up, but not
including  any  consolidation  or  merger of the  Company,  the  holders  of the
Preferred Stock will be entitled to receive a liquidation preference of $114 per
share plus any accrued but unpaid dividends (the "Liquidation  Preference").  In
the event the  stockholders do not approve the conversion of the Preferred Stock
and the Company subsequently  completes a consolidation or merger and the result
is a change in control of the Company,  then each share of the  Preferred  Stock
will  be  automatically   redeemed  for  an  amount  equal  to  the  Liquidation
Preference.  The Company is required to redeem the Preferred Stock for an amount
equal to the  Liquidation  Preference  on or before  February 12,  1999.  If the
redemption  does not occur as required,  the dividend  rate will  increase  from
$16.53  per  share to  $20.52  per  share.  Additionally,  if there are not then
Directors  serving which were elected by the holders of the Preferred Stock, the
number of  directors  constituting  the  Company's  Board of  Directors  will be
increased by two and the holders of the  Preferred  Stock voting as a class will
be entitled to elect the Directors to fill the created vacancies.

            In the fiscal year ended  December  30,  1996,  the  Company  raised
approximately  $1.8  million  from the sale of  various  of its  assets to third
parties,  including  both  personal  and excess  real  property  from  closed or
undeveloped Restaurant locations.  Under the terms of the Loan Agreement and the
Restated  Credit  Agreement,  approximately  50% of those  sales  proceeds  were
utilized to reduce outstanding principal. The Company also received $3.5 million
in connection with the reduction of a note receivable which funds were generally
used to supplement  working capital.  During the first half of 1997, the Company
sold eight  parcels of excess real  property  and eight MRP's  resulting  in net
proceeds to the Company of $2.8 million. As of June 16, 1997 the Company owns or
leases  approximately  42 parcels of excess  real  property  which it intends to
continue  to  aggressively  market to third  parties,  and has an  inventory  of
approximately 28 used MRP's which it intends to continue to aggressively  market
to  franchisees  and third  parties.  There can be no assurance that the Company
will be successful  in disposing of these  assets,  and 50% of the proceeds from
the sale of excess real property  must be used to reduce the  principal  balance
under the Restated Credit Agreement.

            The Company has negative  working  capital of $16.2  million at June
16, 1997 (determined by subtracting current liabilities from current assets). It
is anticipated  that the Company will continue to have negative  working capital
since  approximately  86.7% of the  Company's  assets are  long-term  (property,
equipment,  and  intangibles),  and since all operating trade payables,  accrued
expenses,  and property and equipment  payables are current  liabilities  of the
Company.  The Company has not reported a profit for any quarter since  September
1994.

            The Company  currently does not have significant  development  plans
for additional Company Restaurants during fiscal 1997.

            The Company  implemented  aggressive  programs at the  beginning  of
fiscal  year 1997  designed  to  improve  food,  paper  and  labor  costs in the
Restaurants. These costs totalled 63.6% of net restaurant revenues in the second
quarter of 1997,  compared to 72.1% of net  restaurant  revenues in fiscal 1996,
despite  an 11.5%  decrease  in Company  owned  same  store  sales in the second
quarter of 1997 as compared to the first quarter of the prior year.  The Company
also reduced the corporate  and regional  staff by 32 employees in the beginning
of fiscal year 1997. Overall,  the Company believes  fundamental steps have been
taken to improve the Company's profitability, but there can be no assurance that
it will be able to do so.  Management  believes that cash flows  generated  from
operations  and the  Private  Placement  should  allow the  Company  to meet its
financial  obligations  and to pay operating  expenses in fiscal year 1997.  The
Company  must,  however,  also  successfully  consummate  the  purchase  of  the
Rall-Folks  Notes,  the RDG Note and the NTDT  Note  for  Common  Stock.  If the
Company is unable to consummate  one or more of those  transactions,  and if the
Company is thereafter  unable to reach some other  arrangements with Rall Folks,
RDG or NTDT,  the  Company may default  under the terms of the  Restated  Credit
Agreement.




                                       18


<PAGE>


            The Company's prior operating results are not necessarily indicative
of future results.  The Company's future operating  results may be affected by a
number of factors,  including:  uncertainties  related to the  general  economy;
competition;  costs of food and labor; the Company's  ability to obtain adequate
capital and to  continue  to lease or buy  successful  sites and  construct  new
Restaurants;  and the Company's ability to locate capable franchisees. The price
of the Company's  common stock can be affected by the above.  Additionally,  any
shortfall in revenue or earnings  from levels  expected by  securities  analysts
could have an immediate and  significant  adverse effect on the trading price of
the Company's common stock in a given period.


PART II.  OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS:

            None,  except as previously  reported in the Company's Form 10-Q for
            the quarter ended March 24, 1997.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(A)         EXHIBITS:

            10.39       Amended and Restated  Purchase  Agreement  dated May 14,
                        1997 between the Company and Rall-Folks, Inc.

            10.40       Amendment No. 3 to Purchase Agreement dated June 2, 1997
                        between the Company and  Restaurant  Development  Group,
                        Inc.

            10.41       Amended and Restated Note Repayment Agreement dated July
                        17,  1997  between  the  Company  and   Nashville   Twin
                        Drive-Thru Partners, L.P., et.al.

            27          Financial Data Schedule  (included in electronic  filing
                        only).


(B)         REPORTS ON 8-K:

            There were no reports on Form 8-K filed  during the quarter  covered
            by this report.























                                       19

<PAGE>



SIGNATURE
---------



                  Pursuant to the requirements of the Securities Exchange Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.




                                     Checkers Drive-In Restaurants, Inc.
                                     -----------------------------------
                                               (Registrant)


Date:         July 24, 1997







                                     By: /s/ Joseph N. Stein
                                     -----------------------------------------
                                     Joseph N. Stein
                                     Executive Vice President, Chief Financial
                                     Officer and Chief Accounting Officer






























                                       20


<PAGE>




                             June 16, 1997 FORM 10-Q
                       CHECKERS DRIVE-IN RESTAURANTS, INC.
                                  EXHIBIT INDEX







  Exhibit #        Exhibit Description
  ---------        -------------------



     10.39         Amended and Restated Purchase Agreement dated May 14, 1997
                   between the Company and Rall-Folks, Inc.

     10.40         Amendment No. 3 to Purchase Agreement dated June 2, 1997
                   between the Company and Restaurant Development Group, Inc.

     10.41         Amended and Restated Note Repayment Agreement dated July 17,
                   1997 between the Company and Nashville Twin Drive-Thru
                   Partners, L.P., et.al.

     27            Financial Data Schedule (included in electronic filing only).


































                                       21